• IP BLAWG

    Ignorance Is a Catch-22

    Beverly A. Berneman
    1/14/20

    Apparently, some companies have an “ignorance is bliss” policy when it comes to reading patents. The belief is that if you don’t read it, you can’t be accused of knowing about it. And if you don’t know about it, you can’t be accused of willfully infringing on the patent. Willful patent infringement can increase or enhance the damages recoverable by a plaintiff. So a lack of willfulness can change the value proposition of prosecuting or defending an infringement suit. But is an ignorance policy a good idea?

    By way of background, researching existing patents and patent applications is part of due diligence to make sure that: (1) what you have is really new enough to be patented; and (2) you aren’t infringing on an existing patent. A recent survey by Stanford Law School professor Lisa Larrimore Ouellette reported that 37% of researchers in the electronics and software space were instructed not to research other patents. Considering that there are hundreds of thousands of patents in this space, this might be a way of dealing with limited time and resources. It’s just not feasible to look through all of them while developing new inventions. So weighing the risks, companies make a strategic and business decision not to do any due diligence at all.

    One company just learned the hard way that ignorance may not be so blissful.

    Motiva Patents LLC brought an infringement action against HTC Corp. Motiva alleged that HTC was willfully blind to Motiva’s patents by having a policy of not reviewing patents belonging to others. Motiva also alleged that HTC went one step further, claiming that HTC allegedly performed specific acts to implement and enforce the policy. HTC filed a motion to dismiss arguing that Motiva failed to sufficiently allege HTC’s knowledge of Motiva’s patents. The court denied the motion to dismiss. The court held that a policy of not reviewing other patents is a deliberate action to avoid learning of potential infringement and could be construed as willful infringement.

    The complaint stands and the case will now proceed to see if Motiva can prove its allegations.

    WHY YOU SHOULD KNOW THIS. If HTC acted as alleged in Motiva’s complaint, HTC may have implemented the policy as a matter of self-preservation. It would have decided to take the risk of being accused of infringement for short-term cost and time-savings. Unfortunately, the Motiva v. HTC decision says “you’re damned if you do and you’re damned if you don’t”. So implementing an “ignorance is bliss” policy should be done after evaluating the pros and cons.

  • Benefits Bulletin

    ERISA 2019 Hall of Shame

    Andrew S. Williams
    1/14/20

    The 2019 award winner is a local medical practitioner who we will call “Doctor X.”

    Doctor X notified his employees that he was terminating their defined benefit pension plan. The notice contained an offer of immediate payment of benefits in a lump sum in exchange for an employee release. Doctor X also told his staff that:

    •They had to sign the termination paperwork ASAP or he would reduce their benefits by any additional professional fees incurred if they delayed in doing so.

    •The plan had been retroactively frozen for two years before (without notice!) so no one had earned any benefits for the past two years.

    •Doctor X shared his practice facility with another practitioner for about one year. During that year, the service of full-time employees was allocated between Doctor X and the other practitioner so that Doctor X could say that his employees had failed to earn full-time service credit for the year.

    The bottom line is that Doctor X’s various schemes to deprive employees of their plan benefits reduced their lump sum payments by almost one-half! This could leave a lot more money for Doctor X – who also was a participant in the plan.

    So, for his self-interested, after-the-fact finagling with his plan in complete disregard of his duties as plan trustee, Doctor X gets the well-deserved Hall of Shame recognition for 2019. But 2019 also was his year of comeuppance because we were able to “persuade” him to do the right thing and pay the full benefits to which our client and other employees were entitled.

    TAKEAWAY:

    If you have to deal with someone like Doctor X, call the doctor – the pension doctor!

  • IP BLAWG

    Fake Influencer Followers Means Real Consequences

    Beverly A. Berneman
    1/8/20

    Bet you thought influencers are something new? Influencers are individuals who have authority, knowledge, a position or a relationship that gives them the power to affect purchase decisions of others. Using social media like YouTube, Twitter, Instagram, TikTok and others, influencers will post pictures or videos using a product or service. The goal is to encourage the influencer’s followers to use the same product or service. And if they do, the manufacturer, seller or service provider sees a boost in sales. So those companies compensate the influencer. Despite what you may think, various members of the Kardashian and Jenner families weren’t the first influencers. Actually, one of the first modern influencers was Irene Castle. She and her husband, Vernon, were popular dancers in the early Twentieth Century. They were so popular that Irene became a fashion trendsetter. She was responsible for shorter, fuller skirts and loose, elasticized corsets (goodbye whalebone stays!). She is also credited with introducing American women in 1913 or 1914 to the bob – the short, boyish hairstyle favored by flappers in the 1920s.

    Given the relationship between the number of an influencer’s followers and the influencer’s value, it’s no surprise that an enterprising entrepreneur could help influencers increase the number of their followers. Enter Devumi, LLC (“Devumi”) and its owner and CEO, German Calas, Jr. Devumi and Calas used their websites Devumi.com, TwitterBoost.com, Buyview.com, and Buyplans.com to sell fake indicators of social media influence, including fake followers, subscribers, views, and likes to users of social media platforms, including LinkedIn, Twitter, YouTube, Pinterest, Vine, and SoundCloud. Devumi and Calas allegedly sold more than 58,000 Twitter followers, 4,000 YouTube subscribers, 32,000 YouTube views, and 800 LinkedIn followers. The problem, of course, is if the followers are fake, then the influencer’s value proposition is also fake. This ultimately harms the companies that pay influencers as well as consumers.

    The Federal Trade Commission (“FTC”) sued Devumi and Calas. The FTC obtained a $2.5 million judgment. Devumi is now out of businesses. The FTC settled with Calas and agreed not to pursue the judgment against him as long as he pays $250,000.00 and never does this again.

    WHY YOU SHOULD KNOW THIS. The Devumi and Calas FTC judgment is a cautionary tale for both influencers and the companies that use them. Influencers should carefully vet anyone who promises to increase the number of their followers. Companies using influencers should carefully vet the influencers and insure that they came by their followers in an appropriate way.